How Birchbox Started Making Money? Savvy Moves and a Series of Tough Decisions

It's never easy to cut costs, especially when its your own team.

Katia Beauchamp launched Birchbox, along with Harvard B-school classmate Hayley Barna, in New York City in 2010. They vaulted the beauty product sampling serviceto more than a million subscribers, and a reported $485 million valuation, in just under four years. (Barna left in 2015, but remains a board member.) In 2016, under pressureto generate profits, Beauchamp had to cut staff by 25 percent, to about 230, and scale back plans to open additional retail stores. Beauchamp got Birchbox into the black, and investors responded, allowing the company to raise another $15 million.--As told to Zoë Henry

In 2016, we saw a shift in the market. There was less venture capital deal activity, so it was crucial that we control our destiny by getting to profit and reaccelerating growth. Besides making layoffs, we reduced the cost of putting together a box of beauty products. We developed machinery from an old French design we found in one of our factories. Traditionally, commerce is a pick-and-pack operation, but you can automate that. We reduced human touches by more than half. We cut millions from our monthly expenses.

We also stopped spending on marketing. We were still working on social media and PR, but we turned off television for almost six months. That was painful, but it was the only way we were going to learn what was really driving value, so we could control our investments. The most important thing for an entrepreneur to know is how much halo effect any marketing effort has.

At first, I tried to shelter the team from the things that were really hard, because I didn't want them to be distracted. I underestimated how valuable it is to have all staff members feel how important their decisions are, and to let them share in the bad things. This maps onto what I believe as a mother. Are you going to be there every day to comfort your kids, or are you going to teach them how to comfort themselves? The reality of pursuing something exceptional is that it is always hard. There is no other side of hard. It's about reframing your perspective and loving the hard. Last year, we did more than $200 million in revenue, and in January we turned a profit.

Emotionally, it was horrible. The only thing that keeps you going is that you love the business more than you love yourself.